Hi everyone [
]Well…I do hope I am not going to bore you to tears as it seems quite trivial when I write it down but I am an absolute newbie that has been wandering about the net for days now trying to find info to help me make this decision.
Dillema:
I have been offered $95 000 for a property (35 yo 3/4 bed brick with fibro roof on 800sqm & very much a worst house in best street scenario)) I bought 5 years ago for $71 000. It is currently rented to good tenants for $130 pw. My mortgage repayments are $480 per month and I owe $66 000. I don’t know whether to sell now or keep the property and there are a couple of things that complicate the decision for me.I am 43 and I am not currently working as I prefer to stay at home with my 1 year old. My defacto (31) of two years earns $45k but has no financial interest in the property and is almost fully extended on his own credit limit. In the next year the property will require about $4000 to be spent on connecting to main sewerage, replacing guttering and sealing the roof.
As I am not working the financing of these repairs will be difficult so I am tempted to sell and pay out all our personal debts, put the remainder in the bank and start again with my new partner who has never owned a home. BUT if I do that I may not be able to get my foot on the ladder again due to my age and current employment situation.
Would you sell or hang on to the property even though the repairs will cause some hardship in the near future.
Also the area I bought in is a high growth area (what isn’t at the moment?) a well established suburb 30 minutes from Perth CBD which will soon have a direct train link and possibly underground power. I am expecting these factors to push prices in the area higher but how much and will it be worth it are questions I don’t know…
What am I missing that will help me decide?
All input greatly appreciated!
Caz
[
]Caz if you can stay with the property then do so. If you can meet payments whats the rush? Why not refinance isntead and get the 4000k that way?Hi Caz
Try and hang onto it (only if you are reasonably sure that there will be some capital growth in the short-term). However, if you are unsure about capital growth then I would sell.
$4,000 is not that much in the scheme of things. Maybe do some home based work. Get your de facto to assist the trades people in return for a lower cost of labour. There are ways of getting the repairs done.
By the way, you can’t refinance if you are unemployed. You (and the lender) must ensure you are able to comfortably afford the debt. Don’t put yourself in a situation where you will be forced to sell the property.
Best of luck.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Caz
IF you can keep it don’t sell, it is making you money which I am sure you don’t want to stop receiving.
I would suggest drawing on some of the equity to pay for some “repairs” and then pay out some debt to free up some of your cash as well.
Stu,
If she isn’t working that surely wouldn’t stop then letting her have some equity, as her payments aren’t going to change. Would it?Cheers
Leigh KRead, learn, grow but most of all just do it.
The ENJOLady
It might do. If she borrows more money then her payments will change. The lender need to complete a new assessment to ensure she is able to repay the loan (i.e. they will look at P&I repayments not IO). Secondly the lender will probably want to see another income source so the borrower is not over reliant on rental income. Things you need to be aware of before you alter a mortgage.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auCaz
A few years ago I sold a negatively geared property to use the proceeds for wraps. I now regret that as I would have made more money by hanging onto that property.
Once you sell a property you lose any future capital gain. Think what it will be worth in 10 years time. And think of hte costs – CGT, Real Estate agents fees, legals etc.
There are ways to get that $4000 even if you aren’t working. Since it is a small amount and you have paid your loan down a fair bit, some banks will just give you a top up without the need to show proof of income or submitting a new application. A friend of mine, not working, got a $30,000 increase from ANZ recently, all it cost was $300.
Your LVR is now around 66%. BTW if you have been offered $95,000 it is probably worth much more.
BTW, for future reference, With Low Doc loans you can go up to 80% LVR. (or 90% if you are prepared to pay 10.15%). You can self declare your income.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi cas, just some thoughts on your current situation.
Perhaps you should get the property revalued to 1. ensure $95K is a fair price for your property and
2. as others have already mentioned, you could draw on the equity of the property for further investments or even the required maintenance.
(I too have no idea if you can do this when unemployed, however I do know that in a defacto relationship, if approved by your partner, you could use his income to assist you to do this).Also: When was the last time you increased the rent? Perhaps by offering the tenants a deal with some extra benefits you could increase the rent, thus helping you raise the funds for maintenance. Is your rental income aligned with similar property’s within the area?
Personally: I would consider wrapping the property to the existing tenants (that way they could pay for the maintenance, though you may want to look into the initial costs of this) or perhaps offering them a lease option.
Also remember that the profit between the buying price of $71K and the selling price of $95K will drop once you factor in the initial costs of purchasing and then the selling costs involved.
If it were me in your shoes, I would hold and assess what else I could do to assist my current situation (exactly what you are doing by posting on this forum).
[
]The best of luck, I hope it all turns out well for you! KP.P.S. Please keep us up to date on how it’s going for you as I know the people here are always willing to help[
].quote]
Hi and thanks for the replies so far.
It seems the consensus is to hold the property
I realised on the weekend that if I put myself in the position of looking to buy a second IP would the existing property fit my criteria and decided that yes it did and I also thought that if another investor wants to offer me 95k (the offer was made theough an agent I had called just to see about how things were going in that area as I live some distance from it now and the properties in that area are generally only advertised in the community papers) then somebody else also thinks it is worth having and probably hopes to pick up a bargain.
I have no idea about wraps but the tenant is a single mum with only centrelink income.
The main reason I thought of selling was to clear the combined debts for myself and my defacto and increase our borrowing power for buying a home for us to live in. We currently rent. I am now thinking that we should perhaps look to buy another IP. So much to learn though!
caz, hang on to it, luv. enjoy your baby and hang on to that property. it is security for the future. a passive income in the future. a roof over your head in the future should ever you need one. make the repayments by hell or high water. don’t jeopardise YOUR financial future by being altruistic, ie thinking of your partner and your situation as a couple. Once the property is gone, there will be not much money left in your bank account, and it will dribble away…don’t do it…keep paying off that property bit by bit, and don’t feel guilty for being so bloody minded…when push comes to shove, and i hope it never does, you have to look out for you and your baby’s security, do it girl, hang on to that property,
from one who sold, and wouldn’t do it again if time could be turned back. xxx good luck
Hi and thanks for the replies so far.It seems the consensus is to hold the property
I realised on the weekend that if I put myself in the position of looking to buy a second IP would the existing property fit my criteria and decided that yes it did and I also thought that if another investor wants to offer me 95k (the offer was made theough an agent I had called just to see about how things were going in that area as I live some distance from it now and the properties in that area are generally only advertised in the community papers) then somebody else also thinks it is worth having and probably hopes to pick up a bargain.
I have no idea about wraps but the tenant is a single mum with only centrelink income.
The main reason I thought of selling was to clear the combined debts for myself and my defacto and increase our borrowing power for buying a home for us to live in. We currently rent. I am now thinking that we should perhaps look to buy another IP. So much to learn though!
]
]Caz if you can stay with the property then do so. If you can meet payments whats the rush? Why not refinance isntead and get the 4000k that way?
]The best of luck, I hope it all turns out well for you! KP.
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